Ex-LGC members again seek to challenge surplus-distribution plan in court

A group of local governments is headed to court, again, to challenge the way surplus money is being distributed by the Local Government Center to members.

Last year, an administrative hearing officer ordered the Concord-based LGC, which operates public risk pools that provide insurance coverage to New Hampshire governments, to return tens of millions of dollars in improperly retained surplus money to its members.

The LGC has appealed to the Supreme Court, but faces a Sept. 1 deadline to return money to the towns and cities that were still LGC members on the day the order was issued, Aug. 16, 2012. Four communities complained they were unfairly denied a refund because they had dropped LGC coverage before that date, but the high court in June denied their motion to intervene in the case.

So yesterday, 10 former LGC members – including Concord, Durham, Meredith, Northfield and Salem – filed a lawsuit in Strafford County Superior Court again making the case that they’re being denied money that’s owed to them.

“The Supreme Court didn’t want to hear it. These towns have a legitimate beef, and somebody needs to hear it,” said Rick Lehmann, an attorney for the towns. “There’s a gaping hole in the order from the Bureau of Securities Regulation, and that is the fact that they ordered excess surplus funds to be distributed in ways that are not related to the people who made the contributions that caused the money to accumulate in the first place.”

The lawsuit names as defendants the LGC and Secretary of State Bill Gardner, whose office includes the Bureau of Securities Regulation. Messages seeking comment were left for the bureau’s director and an LGC spokeswoman.

The legal case involving the LGC and its business practices is complex and long-running. The lawsuit filed yesterday centers on one facet: the way the order requires the LGC to return surplus money the bureau said it improperly retained instead of promptly refunding to its members.

The 10 communities asked the court to grant an injunction blocking the LGC from “distributing funds pursuant to the illegal order.” They also filed a petition with the bureau, seeking a new formula for calculating the LGC’s restitution to members.

“I would hope that everybody involved would take a look at it and say, ‘Yeah, that isn’t the fairest way to do it,’ and not let process get in the way of justice,” Lehmann said.

Concord, which was a member of the LGC’s Property-Liability Trust until 2011, wasn’t part of the initial group of communities that sought to intervene in the case, but has now joined the fight.

“We had been reviewing the matter independently, and after learning the other towns were filing suit, we decided to join them because our interests are aligned,” said Deputy City Solicitor Danielle Pacik.

(Ben Leubsdorf can be reached at 369-3307 or bleubsdorf@cmonitor.com or on Twitter @BenLeubsdorf.)